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Tax free shopping stimulates tourism industry

2011-10-05

By Marta Zila

RIGA - Despite the constant state of financial turmoil that is becoming the new norm for the global economy, tourism in Latvia is on the rise. What are the main reasons tourists are visiting this Baltic country? Some come here for the beautiful sights, some are using the excellent but affordable medical facilities; there is a large group of party girls and boys who arrive in Latvia to let their hair down and party, but apart from all those reasons, shopping, or rather Tax Free Shopping, is a big incentive for foreigners to come here for a vacation.

Tax Free Shopping allows residents of the non-EU zone to reclaim Value Added Tax they have paid on their shopping. Fifty of the more than one hundred countries that have VAT allow foreign shoppers to be reimbursed for the tax. There are, of course, some rules and restrictions - for instance, refunds can only be claimed on goods which are exported. Over 50,000 people benefit from tax free shopping every day. Latvia is one of the many countries (along with Lithuania and Estonia) where tax free shopping is available.

When it comes to spending money, everyone loves a bargain. “I am addicted to shopping and usually spend a lot of money whenever I travel,” says Laslie Gionet of Singapore. This time in Riga, Gionet was shopping with her daughter for back-to school items, including clothes and shoes. “The great thing about Riga is that there is a great variety of stores for any taste or wallet,” says Laslie.

Indeed, the modern capital of Latvia is a shopper’s paradise with large department stores, designer discount outlets and one-of-a-kind boutiques in Old Riga. I am meeting my friends from Belarus, Maria and Elena, at the crossroads of two narrow streets in Old Riga on a bright Saturday afternoon. Both young women are carrying large overstuffed shopping bags and it takes me only about a minute to convince them to sit down in the nearby cafe to catch our breath.

They show me their purchases – colorful skirts, warm sweaters for winter and some amber jewelry. “Every time I come to Latvia I make sure to bring an extra empty suitcase or two,” says Marianna. “The suitcases are always full when I leave, and sometimes I have to sit on them to be able to close the zipper.”

“Latvia has some great shopping,” joins in Elena. “Visiting stores is always an essential part of my visits here, and this time I have made a full list of things that I would like to buy for myself and my whole family.”“Belarusian women are very fashion-conscious,” adds Marianna with a smile. “Every opportunity I have to buy nice clothes, I go for it. If I am not shopping in the high-end stores, which we never do anyway, the prices on a lot of items in Latvia are not much higher than in Belarus, which is of course a strong incentive to fill our shopping bags. I can get things here that I can not buy in Minsk, so I do not have to worry about showing up to a party wearing the same dress as my girlfriends. There are great discounts in September and October in Riga stores. Moreover, I always get a portion of VAT back, which only adds to the savings.”

Every resident of a non-European Union country can recover VAT paid in the territory of Latvia and, conveniently, there is more than one way of doing that. For instance, the foreign taxpayer can either submit the electronic VAT refund application to the tax administration of Latvia, or use the tax free shopping service operated by Global Blue Latvia. The company provides the service in more than 800 shops in Riga and other Latvian cities – the tourist just has to look out for the blue tax free shopping logo in the shop’s windows.

Besides Latvia, Global Blue operates in quite a number of countries, including the Czech Republic, the Netherlands, Switzerland, United Kingdom, France, Germany and Estonia.In Latvia the VAT rate for most goods and services is 22 percent. With Global Blue, the customers can get 16 percent of the tax paid back, provided that the minimum purchase amount is no less than 30.26 lats (about 40 euros).

My Belarusian friends love using the Global Blue service whenever they travel. “I am not very good at filling in the paperwork, and I try to avoid doing that whenever possible,” laughs Marianna. “That is why I try to shop at stores with blue stickers on the windows. There, getting money back is easy as one, two, three. I get a tax free check, get it stamped by the Customs authorities on my way home, then send the checks to Global Blue and receive the refund on my credit card.” According to Marianna, getting cash refunds is also possible, but she usually shops with her credit card and it’s more convenient to get the money wired back directly to her account.

“All the purchases made in the Global Blue stores are packed and sealed with a special tape,” says Elena. “You are not supposed to open it until you leave the European Union, but I view it as a benefit. I do not have to worry about forgetting to package the liquids and having to leave my perfume at Customs, like it happened to me one time in the UK with a brand-new bottle of Chanel number 5.”

“I think Global Blue provides a very cool service,” says Marianna. “I travel a lot, and there is absolutely no way I would be able to get my refunds if I had to go through the direct channels, research the information on the tax authorities’ pages, fill in and send my applications and so on. Sure, there is a handler’s fee when you use Global Blue checks, but I think the convenience and the ease, as well as the time I save, are well worth it. Also, the checks are valid six months from the purchase date, which is very convenient. I can collect two or three sets of checks from different trips and send them to the company in one envelope.”

“There are people who make shopping tours to Milan twice a year,” adds Marianna. “Some of my friends buy their entire wardrobes there. I think there is no reason why Latvia cannot compete with Italy in this area. All you need is more duty-free shops.”

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